Dossier Covid-19

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In an attempt to “innovate the Netherlands out of the current crisis”, Dutch Research Organization TNO is finding inspiration in Germany. “Germany increased its national investments in research and innovation right after the crisis of 2008”, says TNO Director Paul de Krom. “While it took years for neighboring countries to emerge from the crisis, our eastern neighbors were experiencing a ‘golden decade’ of rapid economic growth.” Dutch investments in research and innovation should also have an effect in the short term, TNO writes in a position paper that was published today.

According to TNO, economic growth can be generated in two ways: by getting more people into work and by increasing labor productivity, i.e. by creating more value per employee. “As we live longer and have fewer children, the labor force will shrink in the coming decades. Increasing labor force participation is therefore not a real option.” Increasing labor productivity is, says De Krom. “One of the ways to do that is through research and innovation. This is an opportunity for the Netherlands. With new or improved products, services, and production processes, we create value and growth. And strengthen the competitive position of Dutch companies.”

Growth letter

That research and innovation indeed lead to higher productivity is confirmed in the Cabinet’s Growth Letter, says De Krom. Every extra euro results in an extra €4.50 of our economy in the longer term, according to the Growth Letter. “It has also been proven in practice that it works. Unlike in the Netherlands and many other countries, spending on research and innovation in Germany has been stepped up since the financial crisis in 2008. And with success. So the example is on the shelf.”

The Netherlands currently invests 2.18% of its gross domestic product in R&D (research and development), while Germany already invests 3% and has the ambition to grow to 3.5%, according to the position paper. “Increasing the relatively low Dutch R&D investments, therefore, offers the opportunity for accelerated economic growth.” At the moment, the Brainport Eindhoven region, in particular, stands out, with high private investments in R&D. According to TNO, however, this should apply to the entire country and certainly also to public investments in R&D.

Digital economy

The Netherlands has established ‘missions’ as part of its innovation and top sector policy in 2019. These focus on solutions to social issues in four areas: energy transition and sustainability; agriculture, water and food; health and care; and safety. However, key technologies such as AI and quantum technology are also indispensable for solving societal issues, according to TNO. “They can push the technology frontier and bring about groundbreaking innovation. Key technologies are also important for the ‘technological sovereignty’ of Europe and the Netherlands, i.e. to reduce dependence on technology giants from countries such as the US and China.”

For the Netherlands, there are similar opportunities as for Germany, says de Krom. “We are among the top three in Europe when it comes to the power of the digital economy. Key technologies such as AI and quantum computing are developing rapidly. They are pushing back frontiers and can lead to breakthroughs in many sectors. Also for the benefit of major societal transitions, for example in the fields of health, energy, and climate. In this way, we can grow economically and take responsibility.”

Recommendations

In order to actually take the necessary steps, TNO has made a number of recommendations to the cabinet in the position paper. The most important of these:

  1. in the new cabinet’s term, investment in research and innovation should rise from 2.5% of GDP to 3%,
  2. the focus should be on research that can lead to new economic activities within four years,
  3. resources should be used mainly in key technologies such as AI and quantum technology,
  4. all this must take place without complicated new bureaucratic hurdles.

According to TNO director Paul de Krom, increasing post-corona labor productivity through targeted investments in research and development is the recipe for economic growth. “Of course, first things first. The first thing is to secure as many jobs as possible. But let’s do things differently this time for the future. And continue to invest in an innovative and sustainable future and thus ‘innovate ourselves out of the crisis’.”